What are staffing agency contracts?
Staffing agency contracts serve the key business purpose of hiring workers quickly and easily. Staffing agencies are companies that hire their own employees, but then send them out to work for other companies, such as your small business. You use the services of a staffing agency by signing a contract with that agency. Normally, this type of contract is known as a "temp agency agreement" or "temporary staffing contract". However, in any event, the contract will call for the employee to be an employee of the staffing agency, not you. The purpose of the staffing agency contract is to allow businesses like yours to have an employee where you need someone , but not be burdened with handling the employee yourself. In most cases, you should not be taxed or otherwise have to deal with the employee directly. Instead, the staffing firm is supposed to provide the employee and every other service necessary for the employee to function in the workplace. (This doesn’t necessarily mean all contact between your business and the employee must be entirely blocked. In fact, reasonable contact with the employee may make sense in order to communicate and relay instructions to the employee about workplace expectations, things the employee needs to be aware of, and your company culture.) The company that actually employed the employee should be the staffing agency.
Key terms to look for in staffing contracts
When addressing the various types of agreements that may appear between staffing agencies and the companies they serve, language matters. Contract may be agreed to orally, in writing, or by custom through the actions of the parties (each a business term defined in the Texas Business and Commerce Code). The parties’ intentions are "ascertained from the contract alone when it is so worded that it has a definite meaning or it is apparently ambiguous, enforce it as made," however, contracts must be "construed as a whole" and in accordance with customary and usual interpretation. An enforceable agreement with a staffing agency should define: 1. Terms of service. These elements may be set forth in a services agreement, an independent contractor agreement, an employment contract, or another agreement. The document should set forth the parties’ expectations of the employee or independent contractor. If an experience is solicited or implied (for example, when specifying the positions required, listing requirements, or other expectations), the employer may be held to perform if no adequate notice of potential additional training and/or experience is provided. As with all agreements, accurate terminology should be used. For example, if a non-employee is to be classified as an independent contractor and presented as a temporary worker, the company may incur liability for, among other things, tax withholding or negligent hiring. 2. Fees. Will you pay by hour or by "job well done"? The contractual terms should address any commissions the agency will charge, fees assessed for replacement employees, related administrative fees, billing and payment timelines, and late fees. 3. Required duration. Unless an indefinite term is appropriate, the agreement should set forth the start date and expected end date. If the agreement will be automatically renewed at the end of a set term, the automatic renewal period and conditions should be specified. 4. Responsibilities under the agreement. What happens if the position remains vacant, or if the placement terminates before a set time? What are the obligations upon termination?
Advantages of staffing agency contracts
The use of staffing agency contracts offers a range of benefits for businesses of all sizes. One of the most significant advantages is cost savings. By outsourcing the recruitment and retention of temporary employees to a staffing agency, companies can avoid many of the expenses associated with hiring full-time staff, such as benefits and social security obligations. This can free up much-needed financial resources for other business initiatives.
Staffing agency contracts also provide businesses with greater flexibility when it comes to hiring. Companies can quickly ramp up the number of employees during busy periods, such as holidays or special events, and then scale back when their staffing needs decrease. This agility can be particularly beneficial for project-based work or seasonal industries.
Another key benefit of staffing agency contracts is the ability to tap into a wider talent pool. Staffing agencies specialize in searching for and placing qualified candidates in temporary positions, giving businesses access to a deeper and broader network of potential employees than they may be able to find on their own. This can be especially useful if a company is looking to hire employees with specialized skills or experience.
Finally, using staffing agency contracts can help to reduce the burden on a company’s human resources department. By delegating the initial stages of the hiring process to an outside agency, HR professionals can focus on other important aspects of their jobs, such as maintaining company culture and managing employee relations.
Common mistakes to avoid
In staffing agency contracts, terms can be so precarious that a business should never assume parties have the same meaning of a particular term unless that term is clearly defined in the contract. For example, when determining the hours of service to be performed by a temporary employee, consider how a "day" is defined. Typically, one "day" is 8 hours of service. However, for some purposes, 8 hours may be considered the equivalent of 1.5 "days." A contract is either ambiguous or requires interpretation if the parties to the agreement disagree as to the intent.
Similarly, if one party relies on an oral understanding not contained in the written contract to define terms contained in it, or to expand the terms contained in it, that party is taking an unnecessary risk that if the contract is later disputed, the oral understanding may not be regarded as the final agreement of the parties.
It is important to note that mere absence of a defined term in a contract does not necessarily render the term ambiguous. In some cases, the Court will supply a missing term if it can be reasonably implied. Consider, for example, a contract which provides for payment to the staffing agency at a certain rate for a defined period of service, but does not provide a payment rate for services required beyond the end of the period. In that case, the Court may imply that the average payment rate specified in the contract should apply to the additional period of service.
Common Pitfalls and how to avoid them:
Internally refer to the agreement as the staffing agency’s contract.
Don’t rely on an oral understanding.
If the service duration set forth in the contract is not particularly long, employ the new hire or extension of employment as an independent contractor.
Schedule an annual review of all staffing contracts to determine whether they should be continued or renegotiated.
Negotiation tips
When negotiating the contract with the staffing agency, there are a few best practices for the business to follow. First, the business should perform a thorough due diligence process with their counsel . Second, the business should have a solid understanding of the fee structure to be able to determine if it works for them. The business needs to ensure there is mutual agreement on expectations upon onboarding of employees, and the business should understand what happens when things go wrong.
Legal issues
When entering into a contract with a staffing agency, understanding the legal aspects is crucial to protecting your business. It is important for businesses to comply with labor laws and employment standards in your province. Failing to do so can result in administrative fines and court ordered penalties depending on the severity of the contravention. For example, under the Employment Standards Act, 2000, employers are required to provide all employees with a minimum of 3 paid sick days per year. You must also take caution to ensure you have not violated any intellectual property rights should you use any "works" created by the temporary worker in carrying out their job duties. In this regard, it is critical that all employees sign a Non-Disclosure Agreement (NDA) and even a Non-Competition/Non-Solicitation Agreement prior to or immediately upon hiring the employee. By signing an NDA, workers agree not to disclose any trade secrets of the employer or third parties that belong to the employer. Non-Competition and Non-Solicitation Agreements prohibit workers from competing against, or soliciting clients or employees of the business. Importantly, under Canadian Law these Agreements must be reasonable in the scope of the industry, duration, and territory of the restriction. In other words, if the restricted period is too long or the scope is too broad, Courts will not enforce them. Finally, companies must ensure their confidentiality obligations to clients are respected by entering into a formal contract with the staffing agency. This contract should require the temporary worker to enter into a Non-Disclosure Agreement with the client before they are allowed to start working on site. It is imperative that each situation be handled on a case by case basis to avoid inadvertently breaking a law and being subject to costly litigation.
Latest developments in staffing agency contracts
Evolving Trends in Staffing Agency Contracts
The staffing industry is dynamic, and as such, the contracts that govern its practice are constantly being updated to reflect new trends. For example, arrangements that entail partial remote work are an emerging trend in many industries. Employers and staffing agencies must now address the possibility that a temporary employee may only be physically present in the office part of the time. This can be due to district guidelines on driving during inclement weather, or some other policy set forth by the staffing agency itself. If a temporary worker will not always be in the office, it’s important that the staffing agency contract outline how costs and duties will be apportioned. Will the employer be responsible for travel expenses, such as for gas or insurance? Or will the staffing agency reimburse workers for remote hours , alleviating that expense from the employer? These and other related issues must be dealt with in the contract terms, or the arrangement could become untenable.
Another modern consideration in staffing agency contracts is the gradual incorporation of artificial intelligence into remote work practices. Robots and other automated processes are handling increasingly complex tasks that, previously, would have been within the purview of full-time, remote staff. With this in mind, employers should consider whether the firm or company they bring on to handle staffing will provide a human resource, or whether it will be serving as the "hub" through which artificial intelligence processes are managed. Disagreements over billing in these cases can be problematic, and it will be essential that an agreement between the two parties be established in advance.